China and Unocal

In the midst of trying to sift through the hysteria about China's bid for Unocal, I stumbled across this Sebastian Mallaby column that explains very clearly why this deal is nothing to fear:

What if there were a real oil crisis? A simulation conducted last week in Washington suggested that a couple of middling terrorist attacks in Saudi Arabia and Alaska would be enough to cause a global oil shortage, sending prices above $100 a barrel. Yet Chinese ownership of Unocal wouldn't affect this picture. China could respond to the crisis by routing Unocal's energy to its own industries. But again, oil is fungible, so this wouldn't matter.

That's right, and I'm a bit puzzled why economists like Paul Krugman seem to have suddenly forgotten everything they know about international markets and free trade on this subject. See also this old Tyler Cowen post on a very similar point. Now we already have Bill Gertz of the Washington Timesrunningaround screaming and over-hyping the Chinese military threat; we certainly don't need confusion and alarm about an oil deal that, in the end, really isn't going to affect the United States very much. To paraphrase Robert Farley, why should oil scarcity be any more a source of conflict between China and the US than it will between, say, Europe and the US? I haven't seen any of the China hawks address this point yet. What could hurt the United States very much, however, is a mercantilist war between the two countries, fueled by misconceptions and heated rhetoric on both sides. It's enough to make you think that Congress wants a war with China.